What is a commodity?

What is a commodity?

Commodities are raw materials. Corn, coffee, cocoa, cotton, copper, crude oil, (to name a few beginning with "c"), almost all the materials needed in bulk by society, are bought and sold in what is known as the Њfuturesћ market.
Future contracts are for fixed amounts of a commodity to be delivered in regularly scheduled months. In the U.S., cotton futures are for 50,000 pounds, delivered in March, May, July, October, or December, depending on the contract. Crude oil futures are for 1000 barrels and trade for delivery in all months.
In addition to contracts for raw materials, futures are traded for bonds, currencies, and various market indices. These futures also have standardized amounts and delivery dates.
Buyers and sellers of futures use them to lock in prices ahead of the delivery month. Investors trade futures for capital gain. They sell the contract they bought (or buy the contract they sold) before its delivery month. These investors make the market more liquid for the producers and users; sometimes they even make money.
Commodity (futures) speculation is a deceptively high stakes game that is best left to professionals who have plenty of money to back them. If you have a strong interest in a commodity, you grow soybeans, say, or you are a foreign currency expert, if you have a sizable amount of risk capital (50-100% of the value of each contract traded), and if you are drawn to high risk / high gain short term investing, you should learn all you can about the futures market and begin cautiously. Otherwise, you will do better elsewhere.